Author Topic: I am confused about trading  (Read 3519 times)

JanS

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I am confused about trading
« on: August 11, 2014, 08:35:13 PM »
I see the need for trading notes, as it allows someone to cash out. I would think the person cashing out should expect to take a loss since they are looking for quick money rather than waiting for the payments.

I was confused when I saw most notes were selling at a premium rather than a loss.  Are there any reasons to pay a premium? 

Also, The last year of the loan has hardly any interest. Is there any reason to buy that note instead of a new one?

hoggy1

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Re: I am confused about trading
« Reply #1 on: August 12, 2014, 09:45:04 AM »
I see the need for trading notes, as it allows someone to cash out. I would think the person cashing out should expect to take a loss since they are looking for quick money rather than waiting for the payments.

I was confused when I saw most notes were selling at a premium rather than a loss.  Are there any reasons to pay a premium? 

Also, The last year of the loan has hardly any interest. Is there any reason to buy that note instead of a new one?

Welcome JanS,

I'll give you a quick and partial answer but you need to read (spend several weeks) and study the topics on this board.

There are many states that don't permit residents to invest on the primary platforms so lenders in those states have no way to lend except by purchasing on FolioFn. This makes demand for "good" loans very high.

Loans that are 2/3rds repaid are A) much less likely to default and B) return the same amount (YTM) in the last 1/3rd of their life as they do earlier because there is much less principal lent (sold for much less).
Steve

TonySaunders

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Re: I am confused about trading
« Reply #2 on: August 12, 2014, 01:13:40 PM »
Even a note that is only a few months old is worth a bit more because a large number of defaults occur in the first few months. So the original buyer has already taken that increased risk and the new owner doesn't have to.

Notes earn the same rate over their entire lifetime. By the time they reach their last year much of the principle has been paid off though, so they don't yield as much interest any more.

I'd prefer to have $1000 in notes that are in their last year than $1000 in notes that are in their first year, since older notes are less likely to default.

GS

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Re: I am confused about trading
« Reply #3 on: August 12, 2014, 10:43:51 PM »
I have an IRA account so I'm apparently banned from trading.  Back when I used to trade on Folio, I'd list my good performing notes at a premium, and the notes with falling FICO scores and late payments at a discount.  I found it easier to sell good notes at a premium than damaged notes at a discount. 

lascott

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Re: I am confused about trading
« Reply #4 on: August 12, 2014, 11:04:22 PM »
<snip>
There are many states that don't permit residents to invest on the primary platforms so lenders in those states have no way to lend except by purchasing on FolioFn. This makes demand for "good" loans very high.
<snip>
Which will change with the IPO as I understand it. ie. all states residences can lend
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

hoggy1

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Re: I am confused about trading
« Reply #5 on: August 13, 2014, 06:58:08 AM »
<snip>
There are many states that don't permit residents to invest on the primary platforms so lenders in those states have no way to lend except by purchasing on FolioFn. This makes demand for "good" loans very high.
<snip>
Which will change with the IPO as I understand it. ie. all states residences can lend

Scott, Why do you think this? Please post or PM me the references.
Steve

lascott

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Re: I am confused about trading
« Reply #6 on: August 13, 2014, 10:19:23 AM »
<snip>
There are many states that don't permit residents to invest on the primary platforms so lenders in those states have no way to lend except by purchasing on FolioFn. This makes demand for "good" loans very high.
<snip>
Which will change with the IPO as I understand it. ie. all states residences can lend
Scott, Why do you think this? Please post or PM me the references.
I've heard it in a few podcast and articles I think.  I did a quick google search ( https://www.google.com/search?q=%22lending+club%22+IPO+50+states ) and found this:

http://seekingalpha.com/article/2267253-lending-club-ipo
Quote
What's Next for Lending Club
When the company becomes public, a lot of things will change for Lending Club:
First, as of today, residents of only 26 out of the 50 U.S. states can invest in Lending Club. The registration of securities offerings by Lending Club (the loans that lenders invest in) is done on a state-by-state level. Some states deny such registration, which means their residents cannot access Lending Club, at least its primary market. However, once Lending Club is publicly traded, it will benefit from a so-called 'blue sky exemption' that means state-level registration won't be required anymore; all 50 states will become instantly eligible. That means increased competition for the best possible loans.

http://www.lendacademy.com/lending-club-ipo/
Quote
1. Open to investors in all 50 states
Today Lending Club is only available to investors today in a limited number of states. But once they are a public company, they will be able to take advantage of what is called a blue sky exemption. This means that the state restriction will go away and Lending Club will become open to investors in all 50 states. This does not happen automatically so it will not change overnight but shortly after the IPO Lending Club should be open to investors in every state.

Blue Sky : http://www.seclaw.com/bluesky.htm
« Last Edit: August 13, 2014, 10:21:53 AM by lascott »
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

hoggy1

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Re: I am confused about trading
« Reply #7 on: August 13, 2014, 01:01:01 PM »
Hey Scott,

Read this older post    http://www.lendacademy.com/forum/index.php?topic=779.0

I believe Peter believes it because he has been told this by LC
Quote
Now, I am not a securities lawyer so I can't say for sure. But I have been told by the CEO of Lending Club on a number of occasions that the blue sky exemption will allow Lending Club to operate for retail investors in all 50 states. As Bryce says, I am sure they have done their due diligence here and that is indeed correct.

But as other questioners suggest in this earlier post I don't believe the IPO in and of itself entitle LC to sell their notes in any state they like without regulatory approval. Look at the link from Peters post on Blue Sky here  http://www.seclaw.com/bluesky.htm. The word "public" as in public corporation is not in this description of blue sky exemption (BSE).

There will be a BSE for trading LC stock but not their notes. There may be some other reorganization being planned and or conducted in preparation for the IPO that will afford BSE status to LC notes but the IPO itself will not (IMHO).
Steve